The Fed and Monetizing the Debt - An Objective Hypothesis

I start by asserting debt monetization is bad because it increases the money supply and lowers the value of the currency.  Good for debtors, bad for the rest of us.

There are some (Like Dr. Walter Williams) who claim any time the Fed buys US Treasury bonds, they are monetizing the debt.  Others claim that monetization does not happen if the existing money supply is used to buy the bonds.

So the hypothesis:  Only when the Treasury prints new dollars, and the Fed uses those dollars to buy Treasuries, has debt monetiztion occured.

The reason this is important is that if it is true, it should be straightforward to review the record and see when and how much debt monetization has really occured.  This may also be a more objective way to measure inflation than now used.

If this has already been settled, I apologize for wasting your time.  Links to the discussion greatly appreciated, because so far I have not found any.

‹ Elephant in the room a.k.a. Why I am going short on the next round of stimulus The world as we knew it ›